What are your thoughts about the 'Housing Bubble Bursting'?

[JewelDigger]

Just wondering what DU'ers think about the possiblity of the so- called 'housing bubble' bursting sometime soon (or ever). I'm at a crossroads with making some decisions about my personal housing situation and I believe that it's legitimate to weigh this possiblity happening/not happening in there. Would appreciate anyone's thoughts on the issue. Thanks in advance.

[mhr]

1. One Major Factor

is long term interest rates.

The second major factor is demand.

These are obviously coupled. Despite the fact that the Fed has kept short term rates low, long term rates have risen due to deficit spending.

Demand can be choked either by rising long term rates or no willing buyers. We have seen some of the effects of rising rates already.

If the housing bubble continues, the number of willing buyers will decline as prices rise. Further, the number of willing buyers can decline as the jobless recovery continues and people become reluctant to make a major purchase.

It all comes down to reading the tea leaves and how you think things will go in your area.

If the economy muddles along or gets worse, the housing bubble could collapse. If the economy improves, the housing bubble probably has some steam left.

[newyawker99]

10. Congrats mhr!! 800 posts

:toast:

[HPLeft]

2. I wouldn't touch real estate at this point in time

In the end, it depends on whether you're looking at staying for 5 years or 30 years. If you're looking to buy the home of your dreams, with a fixed low interest rate, and you have no plan to relocate any time soon, then you might be ok - even though I expect prices to drop substantially over the next few years. But, if you're looking to buy and hold for relatively short time, you might end up owing more to the bank than the property is worth to a buyer. My recommendation is to look at the price differential between house and condo prices in 1987 (the previous top) and 1993. If you can handle that kind of a drop and still sleep at night, then buying is fine.

[JewelDigger]

3. Actually I'm considering selling my home now

and I would be willing to rent for a year or so and then re-buy in the area that is more convenient for me - or I could just re-buy right away.

[TreasonousBastard]

7. I'd say sell now...

and think several times about buying.

As the population, or at least the number of households, expands, demand keeps up. People need a place to live.

But, anything can happen to blow the numbers all to hell. Around here, housing prices have inflated by up to 25% per year, and it's doubtful something like that can keep up for long.

[HPLeft]

8. Let me put it this way

I sold my co-op last year, after watching it appreciate in value over 400% in about 4 years. I personally wouldn't be owning here, but it is obviously a complex equation involving tax write-offs, low interest rates and personal flexibility. If these unemployment numbers don't improve, the real estate market will eventually take a hit.

[newyawker99]

11. Congrats JewelDigger!! 300 posts

:toast:

[JewelDigger]

12. Well, thank ya.....

Nice of you to notice newyawker!

[MrBenchley]

4. You're NEVER going to find lower rates

[rucky]

5. Depends on your situation...

Do you own a home now?
Where do you live?
Where do you plan on living?

IMHO (as a new home buyer, I've done my research, but that's all that qualifies me)

If you are a first-time buyer, then I'd wait until the New Year (off-season).

If own a home and are "movin' on up", I'd sell now, rent, and take your time shopping around, if you're in a position to do so.

If you're relocating to a less expensive market, you can use the same strategy to maximize your buying power, but it doesn't matter as much.

The repo market is perking up, if you're bargain hunting and have some time.

But it more depends on location than timing:

I would bet cash money that the first bubble to burst is the inner suburbs (already starting to happen). The ex-burbs will continue to boom for awhile, but your potentially best (and most risky) long-term investment would take you back into the city. We're starting to see a migration back into the cities, leaving the inner-burbs to rot in neglect.

[ginantonic40]

6. My 2 cents.

I'll be honest and preface this with the fact that I haven't paid too much attention to the housing market the last few years. Only have annecdotal evidence with what's been going on in my area.


Even at present mortgage rates are historically low. So if one could lock in now on a fixed rate it would probably be a good investment. I never trusted variable rate mortgages myself. Seems to me that with increasing deficit and debt there has to be pressure to raise interest rates.

It used to be conventional wisdom that you buy the most you can possibly afford in the expectation that inflation (in both home prices and wages) would make it more affordable in the future and your payments would effectively shrink as a portion of your income. For a professional (lawyers/doctors/etc) this probably still holds true. For the blue collar/tradesman class I'm not too sure. If I was buying a house now I'd get just what I could comfortably afford and hope for the best: i.e. ousting of the Republicans.

I worry about the ability of my kids and grandkids to ever have the ability to buy their own homes. So if a person can afford to buy now I can't see any reason to wait.

..mileage may vary...

[Snow]

9. Ain't gonna happen

the world has shifted under our feet and we didn't even realize it...
Read this:
http://www.milkeninstitute.org/publications/publications.taf?function=detail&ID=285&cat=Arts